Don't Count on Selling Above the Market Value

 What is it that people say about the stock market?  "Bulls get rich, bears get rich, but pigs get slaughtered".  Things are only worth what they're worth, and real estate is no different.  If a seller tries to take advantage of a tight market by overpricing, it might work, but, more times than not, it won't.  If it does work, it will usually be because multiple buyers are bidding on the same property.

Even then, reason mostly prevails, often the next morning, or when the appraisal comes in.  Although many people are either downsizing, or have saved extra money during the past 18 months, they still will be resistant to paying over the appraised value, despite what they might be putting down (which could even be the whole amount).  Even cash buyers regularly ask for appraisals, just to check that they are not "overpaying".  Although we know that that's a subjective term, and that appraisals can lag in a rising market, people still want to be validated for their business judgment.  If they think they may be getting taken advantage of, they will balk at some point.

Lately, we've been seeing a good number of homes coming back onto the market, after going under contract.  Sure, there are some bad inspections, and some mistakes about how much can be financed, but there are also cold feet, and they often relate to the aftermath of a bidding war or feeding frenzy.  Buyers get caught up in wanting to "win" the house, then wonder whether they have overpaid.

All of this is by way of saying that sellers, who have a short selling season for the next two months or so, should be wary of overpricing.  A good value will get snapped up, and will sometimes even have backup offers, but a property that looks to buyers as though it will sit for a while may do just that.  If there's no perceived risk of losing the purchase, there's no urgency.  And we all know that lack of urgency kills transactions.  Thinking too much about anything will bring out all the negative points.  So don't go there.  Price your home to sell.  Listen to your agent.  You'll thank him/her later!

Rates Are Creeping Up

Here's a shout out to all those buyers out there who are waiting to be sure that real estate prices have hit bottom:  You may succeed in buying when prices have passed the bottom, but you may lose on rates.  Although the Fed has signaled that it won't be raising its rates any time soon, the mortgage rates are more creatures of supply and demand, as well as bank appetites for new loans.  Rates also tend to follow a seasonal pattern--lowest at election time (what a surprise!), and higher in the busiest spring buying season).

 I get rates sent to me on a weekly basis, and it's clear that they are headed up.  If you have waited this long to buy, don't make the mistake of continuing to wait.  They may go back down in the fall, but, by then, prices will have risen.  Buyers have increasingly begun to think of the cost of housing as the cost of the monthly payment, since that matters far more to them than the actual price of the home at any given time.  Not only are mortgage rates heading higher, but insurance and taxes have risen in most places as well.  Buy now, or regret it later!

The Tide is Turning

Probably most of you think that prices in real estate are dropping, with no end in sight.  I would certainly think so as well, if I went by what I read in the national press.  That's why I found it so interesting to look at our numbers for the region for the last quarter of 2011. 

Prices in the New Haven area went up 0.7% for the last quarter of 2011 versus the last quarter of 2010, and the number of sales went up 2.8% for the same period.  While that might not seem like much of a jump, it must be compared to the impression people have that prices are falling.  It's not apples to apples--it measures the total sales against the total sales, not the same houses being transferred each year--but it's a good indicator that the bottom of the market may well have come and gone.  When both prices and units rise, it's not too likely that one of the trends is an aberration.  Prices may not jump, and there may be a few hiccups involving taxes and financing, but the fundamentals are there, and we should see some of the rewards this year. 

If you are interested in seeing all the statistics yourself, please check our website at http://www.hpearce.com/.

Should We Let the Market Fall?

There's a very interesting article on the front of today's NYT business section about the differing predictions as to future real estate prices, and what to do about the flailing state of demand. Some experts think that real estate has been overvalued for the past couple of decades at least, and that the medium-term future upside will be limited to minor price increases. Those people often believe that we are at the beginning of the dreaded "double dip", and that real property prices will drop again.

Other experts feel that real estate is a luxury good, and that people will spend more on housing if they can. As my most recent prior blog would indicate, I'm in that camp. Especially when you consider the age of the baby boomers, I believe that they will "nest" over the next number of years, spending as much as they can on houses where they feel that they could live in retirement, and where their children will visit them. That would argue for higher values, at least for premium properties. As people spend less on food, they are going to spend their excess income on something, and I'm betting on housing over travel (not as easy as it used to be), cars (not politically correct), and clothing (ditto). Housing is where you can express your individuality without looking like a conspicuous consumer.

If you believe this scenario, then housing will improve as soon as consumer confidence rises and remains higher. For more on governmental intervention, I have an idea about that, too, so tune in next time.